This is a statement made by the author of a book I am reading entitled The Layman's Guide To Trading Stocks
(it was sent to Glenn recently). I got out of the stock market months ago but have thought about getting back in at some point, so I thought this book might give me some tips. It definitely did. The author, Dave Landry, doesn't offer a system for buying and selling, but rather a "common sense approach to markets."
As I read through the chapters, a lot of Landry's advice rang true for me. He starts out stating that "You need to change the way you think about Wall Street." He highlights the myths and truths along with charts and facts to back them up. For example, Wall Street Myth #1 is: "The Market always goes up in the long term." How many times have I heard that? More often than I care to remember. Landry points out that markets do not always go up longer term. He gives examples:
Suppose you bought stocks in 1929 at the market peak. Provided you could have held through a 90% loss, it would then have taken you a quarter of a century just to get back to breakeven....
Let's say you bought stocks in the mid-1960's. Your return would have been almost zero until the market finally broke out in 1983, which was 17 years later...
So the market does not always go up in the long term and buying and holding does not always make sense, though that is often the prevailing wisdom.
The book also shares a number of "truths" about the market that make sense. One that I found interesting is that "The markets trade on emotions":
Stocks trade on emotions, period. They do not trade on reality. Stocks trade on the perception of reality, which is driven by human emotions. From the large institution down to the layman, the buying and selling of stocks is based on fear and greed--that is emotion.
So how do you read the emotions? You simply look at the charts.
Okay, at the charts statement, he might have lost me but he seems to have very clear and easy to follow charts about the market that make sense. The book is very easy to read, easy to follow and hopefully, will get me back involved in the market using baby steps or at least allow me to wade back in without losing my shirt.
Labels: interesting books